Here's a great talk that my former marketing professor, Dr. Raj Sisodia, gave at TEDxNewEngland about a month ago. The talk addresses how the world has changed dramatically in recent years and encourages our large corporate institutions to change too. Dr. Sisodia was without a doubt my favorite professor in business school and this talk reminds me of one of his great lectures. I hope you enjoy it.
[youtube http://www.youtube.com/watch?v=O8faXr6WhCM&w=420&h=315]
[youtube http://www.youtube.com/watch?v=kA_0W4hIhuA&w=420&h=315]
Somebody sent me this video of Jeff Bezos being interviewed by Charlie Rose back in 2011. The purpose of the interview was to announce the new Kindle that came out at the time. In the first part of the interview, Rose really pushes Bezos on how the Kindle competes with the iPad. I loved watching the way that Bezos responds. Brilliant. If you don’t have time to watch the entire video, here are the key lines/insights for me.
There was a good article in Becker's Hospital Review the other day pointing out 8 key issues that hospitals and health systems are facing in 2013. In it, Tom Carson, a partner at Welsh, Carson, Anderson & Stowe talks about how ACOs are shifting more power to hospitals:
The biggest flaw with ACOs is that they are driving more power to hospitals — not to doctors. Very scary, and I am a hospital guy. The goal of ACOs was to organize doctors to focus more on patients and keep the patients out of hospitals. Instead, doctors are selling practices to hospitals in droves.The start-up cost of a real ACO is probably $30 million and up in a midsize market — and doctors don't have that capital. So hospitals are pitching that they will be ACOs, and buying up practices. Ever meet a hospital administrator who wants to work to empty his beds? This means more power in expensive institutions, more consolidation of those giants — and more bricks and mortar and more costs. And with zero antitrust enforcement in the last 30 years in the hospital world, we are cruising for regional hospital-based oligopolies — not good for doctors, patients or our hopes for a more efficient system. And the well-intentioned concept of ACOs is feeding that fire.
This leads to a super interesting question. That is, will the regional pricing power that comes from the consolidation that is required to form an effective ACO actually offset the cost reduction that was intended when the model was formed? In other words, will ACOs actually increase, instead of decrease, the cost of healthcare?
I watched Escape Fire: The Fight to Rescue American Healthcare the other night, a documentary on healthcare that was a 2012 Sundance Film Festival Winner. The film doesn't offer any revolutionary ideas but it’s very well done and gives the viewer an excellent picture of the challenges facing the U.S. healthcare system. It’s also pretty entertaining. The film's title was inspired by the Mann Gulch forest fire in Montana back in the 1940's -- a super interesting story in its own right.
The film also does a great job of laying out some interesting and powerful healthcare related statistics. I thought I’d capture some of them here:
If you're interested in the U.S. healthcare system and where it's heading I highly recommend checking out Escape Fire.
It was unfortunate – but not very surprising – to see the news this week that Groupon laid off a portion of their 10,000 employees. If ever there was a predictable bubble, it was daily deals. But it was fun while it lasted, and you can see why there was so much overinvestment in the space. Groupon’s pitch to merchants was to ask them to take a loss by making a super compelling offer that consumers couldn't resist. The offer would generate tons of new customers that would come back and make profitable purchases for years to come. On the surface, it seemed pretty compelling.
With the Groupon news in mind, I spent some time this week thinking about the problem of hospital readmission penalties in the healthcare industry. For those that don’t know, the government is trying to improve accountability and the quality of patient care by imposing financial penalties on hospitals that have high rates of 30 day hospital readmissions. Depending on the rate of readmission, the government will reduce Medicare payments by as much as 1%. For an industry with very thin margins, this is a pretty big deal.
One of the major challenges with hospital readmission penalties is that now doctors have to not only care for the patient effectively during the initial encounter, they’re now responsible for changing the patient’s behavior after they leave the hospital.
Here’s an example: imagine an older man that doesn’t take care of himself. He smokes, eats fatty foods, lives a sedentary lifestyle and hasn’t visited a doctor in years. One day, a pain in his chest becomes so severe that he is forced to check himself into the emergency room. After spending a couple nights in the hospital getting treatment, he starts to feel better. When he’s finally discharged, the doctor recommends that he stops smoking, follows a cardiac diet, takes a prescribed medication, and visits a cardiologist for a checkup every week for the next 6 weeks.
But this is a person that is not used to doing any of those things. The problem that caused him to appear in the hospital – severe chest pain – is not an immediate problem for him anymore. He feels fine. So the hospital is being asked to significantly change the behavior of someone without the initial (and powerful) motivator in place. As a result, he’s very likely not going to follow the doctor’s orders and he’s very likely going to reappear at the emergency room.
It occurred to me that this is the fundamental problem with the daily deal industry. Groupon has the same challenge that hospitals have. Just like severe chest pain, their deals change behavior. Most of the people that buy half-off skydiving, or cooking classes, or services at the super expensive nail salon, weren’t planning to do those things until they saw the deal sitting in their email inbox. But because the deals are so compelling (50%+ off) they bought them anyway and, as a result, Groupon was able to flood their merchant clients with lots of new business.
But it’s because the initial deal is so compelling that it becomes nearly impossible for Groupon to reliably deliver on their ultimate promise of bringing their merchants new, loyal and profitable customers. Just like severe chest pain, the daily deal changes behavior. It forces people to do something that they wouldn’t normally do. But without a continuous and powerful motivator in place (like chest pain or 50% off) the doctor can’t get the patient to come in for an electrocardiogram and the nail salon can’t get the customer to come back for a second manicure.
I wanted to take a moment to thank my family, friends, employer, colleagues and staff in my building for their concern and offers of support in the aftermath of Hurricane Sandy. I was very lucky in that I live in the Flatiron neighborhood of Manhattan and was far away from the flooding; though I lost power, running water and sanitation in my apartment and office. I was able to get out of the city on one of the few buses leaving town yesterday afternoon and am now safe and sound in Boston.
Having no power and being forced to conserve my cell phone battery gave me lots of time to reflect on the events of the last few days. I thought I’d post some of my thoughts here:
Finally, here are some helpful tips from FEMA on how to help the victims of the storm.
Image via Nameen.
Albert Wenger had a good post the other day noting some of the changes in employment in the U.S. over the last couple hundred years. He uses the chart below to illustrate the massive losses in agriculture and manufacturing jobs. Some might argue that this chart indicates that our economy has weakened as a result of these losses. But Albert also notes that while these sectors have seen massive decreases in employment, overall employment as a percentage of the population has actually increased during this time (from 32% to about 45%). There is no doubt that this kind of change causes of lots of pain in the short term, but it's also clear that the creation of new companies and entire industries is critical to the long term health of the economy.
James Suroweicki has a great column in the New Yorker this week laying out why he believes Romney’s healthcare plan won’t work. Regardless of your opinion on the matter, he calls out some important and unique qualities of the healthcare industry that should be considered when weighing both candidates’ plans; that is, weighing how much we should rely on the free market versus the government to solve the healthcare cost crisis.
I recommend reading the entire article but here are a few of the most notable things to consider:
These fundamental realities of the healthcare industry make this issue far more complex than the simple big government/small government ideologies that many of us use to guide our political and economic beliefs.
I read Goldman Sachs’ recent report on Election Outcomes and Potential Impact to Healthcare Stocks earlier this week. Basically the report outlines what’s likely to happen to the different healthcare verticals in the event of a Romney win or an Obama reelection. The vertical that will be most impacted by the election seems to be hospitals and health systems. The reason is that the universal healthcare component of Obama’s Affordable Care Act will dramatically change the payer mix for most hospitals. Suddenly 30 million people will have insurance on one day that didn't have insurance the day before. That means that people who weren't inclined to get care are more likely to get care (more hospital revenue) and, perhaps more significantly, hospitals will get paid for the care that they give to patients that don’t have insurance (more hospital revenue). In addition to helping hospital stocks, the conventional thinking seems to the be that the healthcare mandate will also lower overall healthcare costs. To illustrate that point, here’s a vicious cycle that’s currently driving up the cost of care that may be disrupted significantly with the roll-out of the mandate. Let’s use an imaginary uninsured patient named John:
By requiring John to get insurance, he’s more likely to seek care earlier, thus reducing the costs and losses to treat him, thus allowing hospitals to lower costs, thus allowing insurance companies to reduce their premiums, thus allowing more people to afford insurance.
Of course what sounds good in theory may not work in practice. But it’ll be interesting to see how the mandate will impact healthcare costs should Obama win in November.
I think a lot about the best way to interview job candidates. I’m always trying to determine how effective they’ll be at my company but also how much they’ll actually want to be at my company. I want to be sure that we’re going to like them long after they’re hired and, just as importantly, that they’re going to like us long after they’re hired. Here’s the framework I’m currently using when I interview a job prospect:
This approach has been working well for me lately so feel free to borrow it. I’ll try to document how this changes over time.
A while back there was a post on the Harvard Business Review blog titled, Win the Business with the Elevator Pitch. The post started with this scenario:
Pretend that you are in an elevator at one of your industry's trade shows. You're heading down to the lobby when the doors open on the thirtieth floor. You instantly recognize the executive who walks in and quickly glance at his name badge to confirm he is the CEO of the most important account you would like to start working with. You have never met him before nor have you been able to generate any interest from his organization. You have forty-five seconds to introduce yourself, explain what your company does in a way the CEO would find interesting and applicable, and motivate him to take the action you suggest. Ready? Go!
The post went on to give advice on the best way to structure your elevator pitch and even gave a script. I wrote the following comment on the post:
Great post, Steve. Though I have to tell you that if I ever found myself in the position you describe in the first paragraph, the last thing I would do would be to try to pitch. Business people, particularly CEOs, hate being sold to -- especially in person, in an enclosed area, by someone they don't know. A better approach might be to introduce yourself casually, talk about the event or the weather or sports -- basically show that you're a nice guy. Then if you happen to bump into the CEO later on, you can start to talk more about what you do and -- if appropriate -- have a conversation about how you might work together.
Of course it may be unlikely that you'll get this CEO alone again -- but I'd argue that it's just as likely as converting a 45 second elevator ride with someone you've never met into a material sale.
That said, if you do decide to make the pitch on the elevator the framework you've described above is a great one.
The elevator pitch is dead. Yes, you need to be able to quickly and concisely explain your product's value. And having an elevator pitch in your mind is a great way to do that. But in today's complex sales environment, battering CEO's with your sales pitch is not going to work.
It's not about top-down pushy sales or bottoms-up deference to your prospect where you simply "learn about their business", it's about doing the work to build synergistic partnerships that scale way beyond the sum of the two parts.
So if you find yourself in the elevator with your dream prospect, don't pitch them -- get to know them. And if you're able to keep the conversation going outside of the elevator learn about what they do and tell them about what you do. And get their implicit permission to keep in contact with them. And when it's appropriate to talk to them about how a partnership could help both of your businesses, send them your ideas and setup a time to talk (preferably, not in an elevator).
Erin Griffith had a good post on PandoDaily titled, Whatever Happened To The Promise of B2B E-commerce. I find this to be a super interesting topic. In short, Erin argued that "the trillion-dollar promise of B2B commerce may finally be on its way."
Personally, I'm not so sure. I posted the following comment -- though for some reason it never got posted to the post, so I thought I'd post it here.
Great post, Erin.
Though I’m not sure I agree that b2b e-commerce is finally on its way. There are multiple, inherent transactional differences between b2b and b2c that, I believe, make a transition to b2b e-commerce nearly impossible in the short to medium term. There are so many steps in a large enterprise’s buying process that cannot be replicated in a scalable manner online (customized legal agreements, reference checks, price negotiation, unique purchase approval structures, payment terms and the individual emotions that drive big purchases). Just look at the legal side for a moment. Most e-commerce sites have their own “terms of use” section that dictates the legal terms associated with the use of their site. Large enterprises will want to review and customize these terms of use based on their own policies, procedures and appetite for risk. It’s very difficult for e-commerce sites to allow for this in a scalable way across hundreds or thousands of clients.
Now you may argue that e-commerce has come such a long way that technology should be able to replace much of this bureaucracy. But in a large enterprise each of these steps represent a task that is completed by someone with a job. So you can either eliminate those jobs or assign those individuals to work on something else. But just like purchasing, reorganizing non-strategic job roles for an unclear upside will take a long, long time. And in my view, real growth in b2b e-commerce is simply going to have to wait.